Finally -- Rules Governing Horizontal Well Development

by Spilman Thomas & Battle, PLLC

On April 12, 2013, the West Virginia Legislature passed Senate Bill 243 which contained, among other West Virginia Department of Environmental Protection (“DEP”) rules, the Rules Governing Horizontal Well Development 35-8 (“Rule”). The Rule was developed to provide further direction in the implementation and administration of the Natural Gas Horizontal Well Control Act that became effective on December 14, 2011 (“Act”).
The August IOGA News contains an article about the Rule as originally proposed on June 29, 2012, and the October IOGA News contains an article about the Rule as modified based upon the 345 written comments submitted to DEP and filed with the Secretary of State’s Office on September 14, 2012.
This article highlights some of the more significant adjustments to the Rule through the legislative review and approval process. On February 11, 2013, the West Virginia Legislature’s Legislative Rulemaking Review Committee (“LRRC”) took up for consideration the Rule, as filed September 14, 2012. Following consideration of the Rule by the LRRC, on Feb. 14, 2013, DEP filed with the Secretary of State another modified version of the Rule. The changes reflected in the February 14 version of the Rule include:
  1. Plats of wells – § 6.2.j. regarding plats was revised with respect to the requirement to identify all wells (active, drilling or abandoned) within 500 feet of the horizontal section of the well bore by adding the following sentence: “To make this demonstration, the permit applicant may rely on all available records and locational information; the permit applicant need not conduct a physical survey of the area.”
  2. Occupied dwellings – § 6.2.k.2 which contains the 625 foot buffer zone for “occupied dwellings” was revised to state that for the purpose of this rule “occupied dwellings” shall mean “dwellings that are used for human habitation on a permanent or periodic basis.” The underscored word replaces the word “temporary.” This subsection continues with the addition of the following sentence: “An occupied dwelling is not a structure designed for temporary human habitation, i.e. a mobile camping unit, unless such unit is affixed to the ground, not capable of immediate removal, and attached to at least one public utility; tents or similar camping units; unimproved structures that are not equipped for long-term human habitation; temporary structures erected on the premises commensurate with the initiation of activity indicating the prospect of horizontal drilling activities on the site; and similar temporary structures.”
  3. Bond forfeiture – § 8.3.a.1 was revised by removing the additional penalty of bond forfeiture for failure to timely notify the Chief of the Office of Oil and Gas of well transfers.
  4. Intermediate casing – § 9.2.f.1 was revised by adding the following qualifier to the requirement to cement all intermediate casing to the surface: “unless conducted in a manner otherwise approved by the secretary.”
  5. Report of leakage – § 9.2.j was revised from requiring reporting of “any leakage” detected during the annual inspection of a well to requiring reporting of “more than de minimus[sic] leakage.”
  6. Reporting of additives – § 10.1.a which addresses the reporting of additives used in frac fluids was revised by the addition of the following sentence at the end of subsection a: “The Office will protect the information designated to be confidential trade secrets in accordance with the West Virginia Freedom of Information Act, W. Va. Code § 29B-1-1, et seq. and the process outlined in its Procedural Rule titled Confidential Information Submitted Pursuant to the Natural Gas Horizontal Well Control Act.”
  7. Reclamation of Pits – § 12.4.h which requires operators to reclaim all pits such that they are not left in a condition that “prevents use of the surface for any use available prior to the well activity” was revised with the addition of the phrase “unless otherwise allowed by agreement with the surface owner. . .”
  8. Preventing waste – § 13.1 which requires the use of “every possible precaution” to prevent waste of oil or natural gas was revised to require the use of “every reasonable precaution . . . .”
Several of the changes improved the language to ameliorate standards that would be impossible or unreasonable to implement. On the other hand the revisions to §§ 6.2.j and 6.2.k.2 impose additional burdens or confusion for well work permit applicants.
The February 14 Rule was submitted to the Legislature for approval as Senate Bill 245. The Senate bundled all of the DEP proposed rules into Senate Bill 243 and passed the bill on March 27, 2013, after amending § 10.1 “Well Records Made of Permitted Work.” Section 10.1.a required that “the operator shall list all the additives used in the hydraulic fracturing and stimulation process, including each additives’ specific trade name, supplier, and purpose. The operator shall also list the chemical components of each additive, along with each chemical’s CAS registry number, its maximum concentration in the additive, and its maximum concentration in the fracturing fluid, including the carrier (base) fluid, and the volume of the carrier fluid used.” The amendment adopted by the Senate maintained the same requirement, but added “The operator or service provider may designate the information regarding the specific identity or concentration or both of a chemical as a confidential trade secret not to be disclosed to the agency or anyone else except in the event of an investigation by the office, medical emergency, or for diagnostic or treatment purposes involving the designated chemical, pursuant to subdivisions 10.1.d. and 10.1.e.”
Subdivision 10.1.d authorizes DEP to obtain the information designated as a “confidential trade secret” upon notification by the DEP that such information is needed for an investigation involving “a chemical designated as a confidential trade secret.” Thus, DEP will be able to obtain any information not initially disclosed based on a trade secret designation by notifying the operator or service provider that such information is required for an investigation.
Subdivision 10.1.e requires the release of information designated as a “confidential trade secret” to a “health care professional in a medical emergency, or for diagnostic or treatment purposes, so long as the requesting health care professional executes a confidentiality agreement and provides a written statement of need for the information, indicating that the information is necessary for the purpose of diagnosis or treatment of an individual and that knowledge of the requested information will assist in the diagnosis or treatment of an individual.”
On April 12, 2013, the House of Delegates approved SB 243 with additional amendments, as recommended, in part, by the House Judiciary Committee. One amendment modified subdivision 10.1.e by eliminating any requirement on the part of the health care professional to execute a confidentiality agreement or provide a written statement of need for the information, but added a provision that “the operator or service provider may provide notice to the health care professional at the time of release of the information, that the information provided is solely for diagnosis or treatment of the individual, that the information may be a trade secret, and disclosure to others for any other purpose may subject that health care professional to a legal action by the operator or service provider for violating its trade secret.”
Other amendments adopted by the House include:
a. Deleting in its entirety § 13.5 which stated “Nothing in this rule shall be construed to prevent or discourage drilling deeper in search of oil or natural gas in any well, so long as the operator obtains a deep well work permit for producing, perforating or stimulating a well drilled more than one hundred feet (100’) below the top of the ‘Onondaga Group.’”
b. Amending § 5.7.a by inserting the words “the anticipated MSDS Sheets” in the sentence that now reads: “The plan shall encompass all aspects of the operation, including the actual well work for which the permit is sought, the anticipated MSDS Sheets, completion, production, and work-over activities.”
c. Also amending § 5.7.a by requiring that “The operator shall also provide the Well Site Safety Plan to the surface owner and any water purveyor or surface owner subject to notice and water testing as provided in subsection 15 of this rule.” The Well Site Safety Plan is part of the well work application which the Act requires be delivered to the same persons as designated in the amendment.
d. Amending § 5.6.e by deleting the first sentence and replacing it with “Signage shall be posted at each water withdraw site that provides how to obtain the Water Management Plan, the phone number of the company conducting the withdraw, the Office’s web site name and phone number, and the permit number.”
e. Amending § 9.1.b.2 by adding to the signage requirement at a water withdrawal location the phrase “the telephone number for the Department of Environmental Protection” which was a suggestion made by IOGA in its comments to the Rule.
Also on April 12, 2013, the Senate concurred in the House amendments and passed SB 243, effective as of passage. The bill has been submitted to the Governor for his signature. Since SB 243 is to be effective from passage, and assuming that Governor Tomblin does not veto the Bill, DEP has until June 11, 2013 to file the final Rule with the West Virginia Secretary of State’s Office for publication. The published Rule will designate an effective date that will be 30 to 60 days following publication.
The process that started in July 2011, with the Governor’s Executive Order No. 04-11 directing the DEP to issue an emergency rule governing horizontal well development, resulting in an Emergency Rule dated August 22, 2011, is now resulting in a final Rule that will become effective during the summer 2013. While issues with the final Rule and implementation questions remain, operators will have a final Rule that hopefully will provide some needed predictability and consistency for the continued development of this State’s energy resources and economy.

For more information, please contact:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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